Postgraduate research degree programmes in English universities- costs and revenues

Tom Sastry

This briefing paper draws extensively upon original research undertaken by JM Consulting for HEFCE. JM have also offered helpful comments on an earlier draft for which we are grateful. The analysis contained in the paper is the sole responsibility of the author.

  1. The Higher Education Funding Council for England (HEFCE) has just published JM Consulting’s report into the costs of training and supervising postgraduate research students (PGRs)[1]. The study has thus far attracted little attention - which is somewhat surprising given the nature of its findings which as JM note in their report “will probably be an unwelcome surprise to many in the sector.”
  1. The study indicates that the costs associated with the provision of research degree programmes are much greater than previously thought[2].At the same time, changes to the HEFCE funding formula reduce the revenue associated with research students (for technical reasons rather than because of a reduction in funding).
  1. This paper is concerned with the mismatch between costs and revenues and its implications. It shows that this mismatch is considerable and in doing so demonstrates the value which institutions must place upon the non-financial benefits of research degree provision if the supply of places is not to fall. On the assumption that economic considerations influence behaviour even if they are not its sole determinant, it predicts an erosion of the distinction between postgraduate researchers and salaried employees as institutions are increasingly obliged to see in research students a source of labour as well as funding. Itsuggests that this may make for quite dramatic changes in cases where the research of postgraduate students is largely independent of the research effort of the host department. It also suggests that the number of postgraduate places may reduce over time, and fee levels may increase (and fee waivers reduce). It does not address the desirability of these developments or the case for and against intervention to prevent or mitigate them.

Costs

  1. The JM study was commissioned primarily to help HEFCE make two decisions:
  • The balance of its research budget that should follow research students and research activity respectively
  • What the relative rates of funding should be for postgraduate research students in different subjects[3]
  1. The JM study uses the TRAC (transparent approach to costing) approach to estimate the full costs of training and supervision for postgraduate research students (PGRs)[4]. It is based upon research in a sample of higher education institutions[5], and gives a headline cost for an entire programme.
Table 1: Net institutional costs
£ per FTE student
2003/04 / Band A / Band B / Band C
Total programme cost / 87,317 / 71,446 / 52,383
As a percentage of band C / 167per cent / 136per cent / 100per cent

Source: JM Consulting: Costs of training and supervising postgraduate research students

  1. This figure does not represent a marginal cost which could be saved by recruiting fewer students. It is best understood as the long term cost to which an institution is committing itself at the point that it decides to create new capacity with the aim of training more PGRs.
  1. The cost figures discount costs met directly by project funders (eg. the provision of consumables included in a research council grant). If such a discount were not made, the overall costs would be higher and the differential between laboratory and non-laboratory based subjects would be greater. Support provided for student maintenance is also excluded (this exclusion covers institution funded bursaries as well as stipends provided by external funders).

Benefits

Non-financial benefits

  1. HEIs do, of course, derive significant non-financial as well as financial benefits from the presence of postgraduate researchers which can be offset against these costs. A full discussion of these benefits is included in the JM report. PGRs contribute to the research effort of the institution through their work; they contribute to the research and intellectual environment of the institution by their presence even where their research does not directly contribute to the work of others and they often perform teaching and other duties. Where an institution has played a significant part in training new researchers in a field there will also be a lingering effect upon the prestige both of the institution and the individual academics involved. It is extremely difficult to place a financial value on these contributions- but, in the light of the costing data, institutions will need to decide whether these are sufficient to outweigh the costs they incur in order to obtain them.

Indirect financial benefits

  1. The benefits discussed have the potential to translate ultimately into revenue generation. If the work of PGRs contributes to research which improves an institution’s research assessment outcomes or helps to secure other revenue or if their contribution frees up others to undertake revenue generating activities there may be a financial benefit as well as an academic one. On the other hand, as the total available to universities for research from most major sources is fixed there may be little net financial benefit across all institutions.

Direct financial benefits

  1. There are, in addition, revenues which are directly linked to PGR registrations,which are summarised at Annex B. They may include revenue from HEFCE PGR supervisions payments, income from the Science Research Infrastructure Fund (SRIF) and fee payments. It should be noted that the net amount paid by HECFE related to PGRstudents will reduce substantially (as grant paid in regard to academic staff increases), which will mean that, for top-rated departments in particular, the recruitment of staff eligible for the next Research Assessment Exercise will be more attractive than hitherto and the recruitment of postgraduate research students less so.

The net financial cost of research degree provision

  1. Income and costs vary enormously. We have, however, attempted to illustrate the costs and revenues associated with four typical students over the three years for which funding arrangements typically last. The exemplifications address the cases of:
  • an international student paying full fees (assumed to be £12,000 pa in laboratory subjects, £10,000 in part-laboratory subjects and (£9,000 in library based subjects)
  • a home student who attracts funding both from HEFCE through supervision payments, has fees paid by a research council and also attracts a research training support grant and bench fees
  • a home student who attracts HEFCE funding but has no other support and has fees waived by the institution[6]
  • a home student with no source of funding except his or her own fee payments (very typical of students in departments rated below 4 in the 2001 Research Assessment Exercise).
  1. These illustrations are intended to establish the general point that in most conceivable circumstances the costs of research degree programmes (as measured by JM) will be much greater than the revenues consequent upon their registration. They are not precise measurements of the size of that deficit, and should not be used as such. It is indeed possible that the assumptions made about revenue are so conservative as to invalidate the general conclusion, although this is highly unlikely. Stipends are excluded from revenues as JM have excluded maintenance from their analysis of costs.

Table 2a:Cost recovery for typical PGR in laboratory based subject

Non EU full fee paid / HEFCE funded and Research Council grant / HEFCE funded no grant, fees waived / No HEFCE or other external funding
Fees / 36 / 9 / 9
Bench fees / 3
Research training support grant / 3
HEFCE supervision payment / 21 / 21
Assumed future SRIF income @25 per cent of HEFCE income / 5 / 5
Total / 39 / 38 / 26 / 9
Costs / 87 / 87 / 87 / 87
Shortfall / 48 / 49 / 61 / 78

Table 2b:Cost recovery for typical PGR in part-laboratory based subject

Non EU full fee paid / HEFCE funded and Research Council grant / HEFCE funded no grant, fees waived / No HEFCE or other external funding
Fees / 30 / 9 / 9
Bench fees
Research training support grant / 3
HEFCE supervision payment / 17 / 17
Assumed future SRIF income @25 per cent of HEFCE income / 4 / 4
Total / 30 / 33 / 21 / 9
Costs / 71 / 71 / 71 / 71
Shortfall / 41 / 38 / 50 / 62

Table 2c:Cost recovery for typical PGR in library based subject

Non EU full fee paid / HEFCE funded and Research Council grant / HEFCE funded no grant, fees waived / No HEFCE or other external funding
Fees / 27 / 9 / 9
Bench fees
Research training support grant / 3
HEFCE supervision payment / 13 / 13
Assumed future SRIF income @25 per cent of HEFCE income / 3 / 3
Total / 27 / 28 / 16 / 9
Costs / 52 / 52 / 52 / 52
Shortfall / 25 / 24 / 36 / 43

Issues raised

Possible impacts upon institutional behaviour

  1. Attempting to estimate levels of cost recovery on PGRs is a highly imprecise science. This analysis does, however, support JM consulting’s conclusion that: “Current funding for each student varies considerably, but is well below the levels of cost, leading to significant levels of under-recovery of costs, almost without exception”. The very real and important benefits (discussed in paragraphs 8-9) which the presence of PGRs brings to institutions need to be set against the financial burden of supporting them, but it is nevertheless important to note that those costs are very considerable. That said, abrupt changes are not to be expected: where facilities are already in place there is unlikely to be any profit in leaving them idle.
  1. It is also important to remember that any reduction in the supply of places is extremely unlikely to affect the most desirable students[7]. Research students will continue to be cheaper to employ than salaried staff - who make use of the same infrastructure and support services whilst also carrying much higher salary and associated costs. Therefore, where the primary motivation for recruiting postgraduate research students is to benefit from their contribution to an institution’s teaching or research we do not anticipate any change in behaviour because there is no more economic way of securing this contribution. In other cases, though,institutions may well respond – in due course if not immediately – by reducing the supply of places and increasing fee rates.
  1. Given the costs that have been identified, the logic of this analysis is that institutions will increasingly look to understand better the non-financial benefits associated with PGRs and to give preference to students who deliver these benefits over those who do not. Thissuggests a future for postgraduate research degree programmes in which research students are expected to make a practical contribution to the work of their host institution; in which their research topics are chosen with an eye to this need and in which they increasingly resemble salaried employees. It also suggests that opportunities to study for research degrees part-time, by distance learning or indeed by pursuing independent research largely unconnected to the research effort of the department may be curtailed. In disciplines where the ‘lone scholar’ model predominates, the implications may prove more serious than in those where the most able PGRs are already well-integrated into the research effort of the research teams in which they are based because it will be harder to demonstrate the contribution of the student to the work of academic staff.

Will fee levels rise?

  1. On the face of it, the JM study provides institutions with a strong case to raise fee levels. It will be interesting to see if research councils and other grant funders are prepared to increase the level of their support and whether self-funding students can be persuaded to pay more.

Future of institution-funded studentships

  1. It is also probable that the study will make institutions more reluctant to waive fee payments. In 2003, 15 per cent of home and EU domiciled students had their fee payments met by the institution[8]. It would be surprising if this figure did not fall.

Will the costing information lead to a reduction in PGR provision?

  1. It is likely that the figures in the JM report will give rise to serious discussions within institutions concerning the costs of postgraduate research training and supervision. Where there is a mismatch between costs and revenues institutions will have to be satisfied that the non-financial benefits associated with the presence of postgraduate researchers are of sufficient value to offset the financial losses. It may be that they are and that institutional behaviour is largely unaffected by the considerations highlighted in this paper. The transparency provided by the JM study and the simplified HEFCE funding policy are entirely new. What is more, the value of a PGR to an institution consists not just of direct revenues but also non-financial contributions to the institution’s work and reputation – and there has been no systematic attempt to place a value on these. Given these uncertainties, predicting the impact of the information summarised in this report upon the behaviour of universities and colleges is equally uncertain.
  1. What is certain is that the non-financial benefits associated with the presence of postgraduate researchers will be closely scrutinised by institutions. If the result is a better understanding of the contribution made by PGRs this may be a good thing; but a consequence of this may be that opportunities for more independent study are limited.

Issues for national policymakers

Is the burden equitable?

  1. There are four beneficiaries of research degree programmes:
  • the student,
  • the institution (which receives the benefit of the student’s contribution to its research and to the academic environment more generally),
  • the higher education sector more broadly (which receives a supply of people qualified to work in academic roles)
  • the wider community
  1. Under the present system it is clear that a very high proportion of the costs are borne by the institution. It is worth asking whether the way in which costs are shared reflects the distribution of benefits.

Will HEFCE further enhance its funding for PGR training and supervision

  1. It needs to be borne in mind that HEFCE has it within its gift to make provision for PGRs more attractive by increasing the rate of funding (at the expense of funding for other activities). It is HEFCE that decides how much to provide in supervision payments and how to structure the funding system. If, following these revelations, universities cut back the number of postgraduate research students, it would be open to HEFCE to adjust the funding arrangements to reduce the losses they incur on these. It has to be said, however, that the apparent losses are so large that it is unlikely that the HEFCE figures can be adjusted to such an extent that these are offset entirely. Universities will therefore still have to make judgements about whether the non-financial benefits outweigh the direct costs.
  1. Nor is it clear that HEFCE will wish – or ought – to take steps to maintain PGR output. Indeed, there has been very little systematic thinking about appropriate levels of research degree provision. Policymakers will want firm evidence both that the supply of trained researchers is inadequate (either in a specific area or across the board) and that this is the result of supply side problems rather than inadequate demand before committing scarce resources. At present that evidence is lacking. The propensity of UK domiciled students with firsts and upper seconds to enter research study is declining but there is no evidence that this is the result of a lack of places and equally there is no evidence that current levels are problematic. This is an area that warrants further study.
  1. The data show clearly that the cost for those institutions that do not receive HEFCE funding are very substantially greater than for those that do, and this is likely to lead to even more pressure on such institutions to reconsider whether to pull out of PGR provision. The question then arises whether this matters: it would be consistent with the HEFCE policy to concentrate research training where the research quality is highest, and PGR provision would become even more concentrated than at present. If that policy is well-founded then such consequences would be acceptable; if they are not, then they would not.

Annex A

Changes in the funding of postgraduate research students

  1. The publication of the JM study coincides with changes in the way in which HEFCE funds institutions for training and supervising postgraduate research students. From 2005-6 HEFCE will make a single payment to institutions based solely on the weighted[9] number of qualifying[10] home and EU resident PGRs in each institution.
  1. Previously funding was provided through three separate routes.
  1. First year full time (and equivalent part-time) students were funded through the HEFCE teaching model. The model is constructed in such a way that there was no ‘rate per student’ although the impact upon grant levels was low because the model assumes receipt of a fee and discounts this from the grant calculation. Assumed fees for postgraduate students are much higher than for undergraduates, reflecting the gap between the (now abolished) up-front undergraduate tuition fee and the typical postgraduate fee.
  1. Home and EU second and third year full time (and equivalent part-time) students attracted a supervision payment at a level considerably lower than that payable from 2005-6. Only those in departments rated 3a and above in the most recent Research Assessment Exercise were eligible.
  1. The sum of these two elements came to considerably less than the £183m which HEFCE will pay out in supervision payments in 2005-6. Funding for training and supervision has therefore been increased.
  1. Under the old system, however, numbers of qualifying students (including non-EU students) also affected institutions’ core research grant. In effect, research student numbers were being used as a proxy for overall research capacity[11] - which drives core funding allocations - as well as being fundable in their own right. Under the new system this is no longer the case. It is important to recognise that this does not represent a cut in funding - in fact the overall level of core research grant has also risen considerably as has the funding intended to support the training and supervision of research students. All that has happened is that core research grant is now allocated on a basis which does not take account of research student numbers.
  1. In consequence, whilst the amount set aside for training and supervision under the old system was less than under the new, the value of each student could be much higher, especially to institutions with higher RAE ratings. The net effect of the changes will be to reduce the value of the funding dependent upon research student numbers from £303m in 2004-5 to £183m[12] in 2005-6 even though the funding intended to support the costs of training and supervision will actually increase. The balance will (in effect) contribute towards an increase in the rate at which research active staff are funded.

Annex B